Interest-Only (IO) Mortgage

An interest-only mortgage is a mortgage where the borrower is required to pay only the interest on the loan. There is no principal amortization required. This can result in lower monthly payments despite the fact the interest rates are higher than for traditional mortgages. These mortgages increase the risk and the cost of borrowing over time. Therefore, these types of mortgages are not beneficial for most Canadian mortgage borrowers. IO mortgages are not common in Canada and can typically only be found by a few alternative lenders or private lenders.